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Urban LandMark

Do informal land markets work for poor people?
An assessment of three metropolitan cities in South Africa

Synthesis Report

Colin Marx

Isandla Institute and Stephen Berrisford Consulting with Progressus Research and Development

May 2007

SARPN acknowledges Urban LandMark as a source of this document:
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This research explores extra-legal urban land transactions and tenure in South Africa, focusing on formal land registration and management systems, in a total of nine settlements in the metropolitan areas of eThekwini, Cape Town and Ekurhuleni. The research contributes to Urban LandMark’s goal of positively influencing policies and practices in South Africa “towards improving poor people’s access to well-located urban land, by making markets and land planning, and land management systems work better, thus giving effect and meaning to the right to land”. Urban LandMark set a hypothesis to test in this research:

    “…there is an identifiable relationship between how mainly poor people transact and hold land, and the in-built barriers which the formal land market and legal system set up. These barriers may force people into extra-legal dealings which remain more attractive because of a number of factors including:
    • The failure of the formal system to accommodate the needs of the poor (including the failure to recognise typical social contracts which exist and underpin the informal system), and
    • Affordability constraints arising from the operation of the formal land market, urban land speculation, and municipal land release and land management processes, not to mention high levels of poverty.”
This research partially supports this hypothesis. There are indeed identifiable relationships between the ways in which mainly poor people transact and hold land, and there are in-built barriers in the operation of the overall urban land market. This research also partially rejects the hypothesis, because the in-built barriers to the effective operation of the land market for poor people derive not only from the formal market and legal system or a neat dichotomy between formality and informality. Other important factors are at work.

The overall conclusion of our empirical work is that both ‘the market’ and ‘the state’ are present in informal urban land transactions in the case studies. The informal land market is thus co-constituted by the ‘the market’ and ‘the state’. Because both the market and the state are active in this ‘informal’ sector, there are major opportunities for reform. But our research shows that the current mode of operation in this ‘informal’ land market is complex, creating an imperative for nuanced intervention. Our analysis establishes two useful conceptual distinctions that help identify different operational processes: The first is between a ‘financially dominated land market’ and a ‘socially dominated land market’. The second is between the formal institutions (the laws and juridical systems of the state) and the day-to-day execution of the state’s responsibilities.

While our empirical data shows that there are instances where informality arises because of failures in the financially dominated land market and the formalities of the state, we suggest that such a view is incomplete. The empirical evidence is clear that poor people interact all the time with both state and market over land. But they also engage in a socially dominated land market where state and market are not the key drivers. The twin assumptions – that ‘the market’ and ‘the state’ are absent in poor unregulated areas of South Africa’s cities or that it is possible to expand ‘state’ and ‘market’ involvement in land onto a blank slate where social relationships have no role in shaping access to and transactions of urban land – are both simplistic. Rejecting these common assumptions will have important implications for how policy reform is conceived.

A widely touted alternative reference for analysing the urban land market, especially among bankers and governments, stems from the financially dominated land market model (Bernstein et al 2005). The problem is that this model tends to obscure and undervalue transactions based in any other register than price (Dowall 1993, Kironde 2000). The conclusions that are typically reached from the application of this model are that there is either no (financially dominated) market operating in poor areas or that it is ‘thin’, ‘defective’ or ‘dysfunctional’ in some way. Accordingly, the policy prescriptions tend to be based on interventions that are framed in the format of financially dominated markets and focus exclusively on issues such as clarifying property rights or providing access to credit (de Soto 2006). There is little within the financially dominated model that will alert policy makers that interventions framed in this way are not applicable to socially dominated land markets.1

We argue that problems arise when only one model of land markets is used (see also Jones and Ward 1994). In some cases, typically those that use African cities as a reference point or that are promoted by representatives of civil society, the understanding that is drawn upon is the socially dominated land market model. Here the state is seen as absent or very weak and thus marginal to how land transactions actually occur, and the focus falls on residents’ own systems of organisation and operation (Barry 2006, Davies 1998). In practice in South Africa’s major metropolitan areas, there is both a high level of private sector involvement in land financing and extensive state involvement in land regulation, distribution and development. Thus, while we show that there is still a socially determined dynamic to the urban land market, this model is inadequate for a full understanding of our conditions.

In relation to the state, the financially dominated land market model assumes a tabula rasa upon which new legislation can (simply) be imposed. In studies of informal urban land markets, the category of informality is derived from the absence of state registration and activity. This does not leave any space to assume that there is informality in formal transactions and formality in informal land transactions. In the three South African cities studied here, we show that the formal and informal modes of operation of land coexist and are mutually reinforcing, though not always in a manner that is in the interests of poor people.

The aim of this work is to make the informal urban land markets visible and legible so as to inform a view of urban land markets that enables progressive intervention.

We argue with Jenkins (2002, 7) that the task is “not to substitute modern systems for ‘traditional, ineffective’ systems, but to avoid unregulated co-existence. The stress is thus now on [consolidating] appropriate social forms of land administration which are practical, legitimate and equitable (social goals) – rather than (making) economic arguments for efficiency (economic goals)…. [T]he complex and hybrid reality of socially-determined land rights has to be the starting point for research…”.

To allow for the complexity we have just described, we open up the research to show how transactions around land occur, the way land claims assume meaning, the multiplicity of identities that are derived from and related to land and the importance and unpredictability of social networks. The co-existence of different meanings, or registers, of land is a dominant theme of all of the case studies. This forces us to acknowledge that social, cultural and religious factors also provide parameters for understanding and executing land transactions.

  1. These issues are explored in more depth in the accompanying literature review.

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